Tuesday, February 26, 2008

A Serious Critique of Lost Legacy Writes (part 1)

Currently, I do not have much time for commentary and reading other Blogs, but I cam across a most entertaining Blog making some pointed remarks abou Lost Legacy's efforts to correct the overwhelming consensus that Adam Smith had a 'concept', a 'theory', a 'principle', even a 'paradigm' of 'an invisible hand', guiding the market places of the world to the social betterment, etc., of society, despite - and this is where I part company with most economists, despite my strong belief that markets are the least worst, by a long way, that humans may organise a society's affairs - irrespective of the nature of the self-interests of those who participate, even when their actions are socially disruptive, even malign (such as is the cases with monopolists, protectionists, and polluters).

Well, while looking up a reference, I came across an article on this site: PRAXIShere(5 December, 2007: yews, I know, I missed it when it was published!):

"Invisible Hand - fragments from the history of a metaphor. (Part One. Featuring a lot of googling and almost no real knowledge)"

"Over on Adam Smith’s Lost Legacy, Gavin Kennedy is fighting an infinite one man losing battle against the misattribution of the ‘invisible hand of the market’ doctrine to Adam Smith. Smith only used the phrase, Kennedy tirelessly asserts and reasserts, one time in ‘The Wealth of Nations’ – not discussing the market in general, but discussing an individual’s decision to invest in the domestic economy, rather than in riskier foreign ventures. Here’s the famous quote:“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

Kennedy tells us that the pervasive use of this phrase in twentieth and twenty-first century economics misrepresents Smith’s meaning. Smith isn’t claiming that laissez faire market operations will always, or even usually, increase the common good. He’s making a specific point about a specific issue, using a vivid metaphor – and to take the doctrine of the ‘invisible hand’ as the cornerstone of Smith’s legacy is to do considerable violence to Smith’s nuanced thought.

Kennedy has a point - the ‘invisible hand’ metaphor does not play the prominent role in Smith’s work that it does in modern economics. But I have some doubts about Kennedy’s broader argument. There is a strong sense in Smith that social and economic relations are guided by a beneficent impersonal force to bring about the greatest social good. At times this goes by the name of the ‘invisible hand’; at times, by the name Providence. In the other famous ‘invisible hand’ passage, from ‘Theory of the Moral Sentiments’, Smith articulates an early version of the ‘trickle down’ theory of income distribution."

Comment

Praxis goes on to make a good case for the contrary view and its author attempts to rescue the invisible hand metaphor from the influence, such as it is, of LostLegacy.

With only two days left to go to return the book files for my new book, Adam Smith: a moral philosopher and his political economy (Palgrave, July 2008) before it goes finally to press, I do not have time to delay that necessary work to see what can be made of the argument in Praxis (the first serious critique I have read so far of my views on what became of the invisible hand metaphor in the hands of the epigones of Adam Smith, located in the environs of Chicago University, who is, in my view, somewhat unrelated to the Adam Smith who was born in Kirkcaldy in 1723).

I can promise you that I shall return to the Praxis critique in the next few days once I have had a final read of the proof files. Because the Praxis critique is written seriously I shall start by seeing where we can agree; I shall search also to see if other parts of the Praxis critique have been published in the meantime.

6 Comments:

Gavin - I'm flattered you've looked at my site; but I’m squirming slightly at the thought of you discussing those Adam Smith posts. The title says it all - a lot of googling and very little real knowledge. Still, looking forward to your response. The second post on Smith, if you're interested, is here:

I thought that the invisible hand (IH) was not a comment on domestic commerce, but rather domestic commerce was just part of the build up of individual choices that help illustrate the analogy of the IH and unintended benefits bestowed upon others not involved in those choices. I see A.S. as using any combination of individual choices to expose the works of the IH.

Deleted prior post. Just needed a minor edit. Could that function be include in the future? I believe I am going to be reading your blog for some time. Thank you for providing worthwhile intellectual stimulation that deviates so little from my limited understandings.Tom Moeller, Austin, Texas USA

Thanks for your comment. I have now posted two responses, with a possible third to come (about the alleged waste of time in trying to dent the consensus about the invisible hand. I do not share your opinion.

Science does not progress by consensus. It proceeds by the competition of ideas and the tests of evidence. In time, the truth emerges, when it proves more useful than the consensus.

Gavin, thanks, I read your longer response with interest. I don't really feel capable of adequately discussing these issues - I'm just too ignorant - but I've put up a post on my site linking to your blog. W/r/t the alleged waste of time trying to dent consensus - I didn't mean it. :) Of course it's worthwhile trying to change people's opinions and attitudes; I was just noting the ghastly difficulties often involved. Here's to Sisyphus; he'll make it one day.